Sometimes it can take a considerable period of time for a financial remedies order on divorce to be implemented, but is that delay alone sufficient grounds for the court to set aside the order and replace it with a fresh one?

That was the question to be determined by Mr Justice Mostyn in the recent case HR v SR.

The relevant facts in the case were that a financial remedies order was made by consent in 2012. For the purposes of this post we do not need to know the detail of the order, only that it involved the sale of certain properties. The order was not implemented, “for wearily familiar reasons” (to use Mr Justice Mostyn’s phrase). Amongst other things, there were disputes between the parties about the sale process and the selling agents (all of which brings back unpleasant memories of my own frustrating experiences of trying to put such orders into effect).

These difficulties led to the matter returning to the court for ‘implementation litigation’. However, what ultimately happened was not the court taking steps to ensure that the order was implemented, but rather the court deciding that the time for implementing the order had passed, and so the order was replaced with a fresh one, in October 2017. Again, it is not necessary to explain the detail of the new order, save to say that it was more generous to the wife than the old order, having the effect of leaving her £46,000 better off.

There is one other relevant fact. In September 2017, before the new order was made, the husband was made bankrupt. This of course meant that all of his property vested in his trustee in bankruptcy.

The husband, supported by his trustee in bankruptcy, appealed against the new order. The appeal was heard by Mr Justice Mostyn in the High Court.

Mr Justice Mostyn set out the relevant law, beginning with the basic principle, which is hammered home to all family law students, that when parliament passed the current law on financial relief following divorce it made quite clear that orders dealing with capital are usually meant to be final. Save in very limited circumstances (more of which in just a moment), capital orders cannot be varied or discharged. There is to be no second bite of the cherry, even if the original order has not yet been implemented. It is true that a financial order will usually say that all claims by either party should not be dismissed until the rest of the order has been complied with, but that does not entitle a court to replace an order that has not been implemented with a new one.

The exceptions to this ‘finality rule’ are twofold. Firstly, of course, the order can be appealed, and if the appeal is successful the old order can be struck out and replaced with a new one. In this case, however, neither party had appealed the original order. Secondly, the order can be set aside on the grounds of fraud, material non-disclosure, mistake or a supervening event which invalidates the basis on which the order was made. The last of those possibilities used to be known as the Barder jurisdiction, after the leading case on the subject, but it is now included in Practice Direction 9A, which explains when an order may be set aside. As Mr Justice Mostyn said, PD9A does leave open the possibility of other grounds for setting aside the order, but he found that “mere delay in implementing a routine property adjustment order could never amount to a ground for a set aside under rule 9.9A.”

As Mr Justice Mostyn explained, those principles of law were decisive of the outcome of the appeal. The capital order was final, and there was no basis upon which a new order could be made. The appeal was therefore allowed, and the new order was set aside, as the judge had made it without jurisdiction. Accordingly, the original order was reinstated.

But that was not the only reason why the order had to be set aside. As Mr Justice Mostyn further explained, at the time it was made the husband was bankrupt – and therefore, as explained above, at the moment of the making of the bankruptcy order all of the husband’s property vested in the trustee in bankruptcy. Therefore, when the court made the new order the husband in fact did not have £46,000 worth of property capable of being taken from him and given to the wife.

Comments(2)

What is shocking-but-not-surprising in the case is how the judge in the court of first instance could have been so ignorant of two fundamentally important aspects of the law – the Barder grounds (and even more so the relevant Practice Direction) and the impact of bankruptcy. This case never should have gotten as far as needing an appeal.

Of course in a properly organised world debts arising in financial relief proceedings from a bankrupt spouse, usually a husband, would (1) be provable in bankruptcy and therefore (2) released on discharge but (3) postponed for dividend behind all other debts, marriage being a partnership.

Debts due TO a bankrupt spouse, usually a wife, would be due to the trustee in bankruptcy for the benefit of the creditors.

Leave a Reply

Stowe Family Law LLP is authorised and regulated by the Solicitors Regulation Authority. SRA ref 469401.
Stowe Family Law LLP is registered with Companies House, ref. OC331570, and registered for VAT, number 918 5722 04.
Calls may be recorded for quality and training purposes.